Why a business keeps records at all

Why write anything down

A business is a stream of small events. Money comes in, stock goes out, someone promises to pay on Friday. Each event is perfectly clear at the moment it happens and completely blurred by the end of the month. Records exist because the owner has to answer questions long after the moment has passed:

• Did that customer ever pay the R150 she owed?
• Was last month better or worse than the month before?
• Can the business afford to order stock on Friday?
• If a bank or SARS asks how much this business earned, what does the owner show them?

None of those can be answered from memory, and none of them can be answered from the bank balance alone. A bank balance tells you what is left. It does not tell you what happened, who it happened with, or whether it is repeatable.

Keeping account is older than accounting

Recording value is old, and it is local. Cattle owners across southern Africa have long known each animal in a herd by name, colour pattern and lineage, and can recite the herd in public so that others may check it. That is an inventory record with a built-in audit: the community hears it and would notice a missing animal. Stokvel groups keep a members' book showing who paid in, how much and on what date, read out at the meeting so that every member hears the same figures. A spaza shop keeps a credit book with a page per customer, an amount, a date, and initials when the debt is settled.

These are not rough substitutes for accounting. They already contain what a record needs: an event, a date and an amount, held where more than one person can check it. Formal accounting adds one more thing, a standard shape, so that a reader who was not in the room (a bank, a supplier, an auditor, a future partner) can read the record without asking the owner what it means.

Worked example. Thandi runs a hair salon in Mthatha. On Monday she does R820 of work that is paid in cash, plus one braiding job worth R150 for a client, Nosipho, who will pay on Friday. On Friday Nosipho pays the R150 in cash.

What must be recorded, and why?

1. Monday. The salon earned R970 of income in total, because R970 of work was done. R820 of it arrived as cash. R150 of it has not arrived, so a second record is needed: Nosipho owes the salon R150. The salon now owns a claim instead of the cash.
2. Friday. Cash goes up by R150 and the claim against Nosipho falls to nil. Nothing new is earned on Friday. The earning already happened on Monday when the work was done.

If Thandi wrote nothing on Monday, then by Friday she cannot prove what Nosipho owed, and her books would report the R150 as Friday income. Her Monday would look weak and her Friday would look strong, and both pictures would be false.

Core checkpoint: every usable record states three things, what happened, when it happened, and how much. A scrap that says 'Nosipho R150' with no date and no reason is not a record, it is a riddle. Test any record you write by asking whether a stranger could read it in six months and describe the event correctly.